Saturday, May 16, 2009


Brad DeLong does a quick run through of the Keynes-Hicks IS-LM model, which has apparently fallen on hard times in academic economics, but makes sense of macroeconomics in a compact way. Most good economic models are like this; the equivalent of a Swiss Army knife, a basic tool useful in many situations:

If you try to read pre-Keynesian monetary theory, or for that matter talk about such matters either with modern laymen or with modern graduate students who haven't seen this... you quickly realize that this seemingly trivial formulation is actually a powerful tool for clarifying thought, precisely because it is a general-equilibrium framework...

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